[VoiceOps] SMS apps, providers, and peers

[Alex Balashov]

Peter,

Thanks for a thought-provoking and certainly, well-researched 
counterpoint.  Here are some thoughts:

Peter Beckman wrote:

>  Because while it probably will be swallowed by something else someday,
>  it's here now, and there is a demand for it.  

I suppose that, in light of perpetual change, the presence of 
something in the acute here-and-now is always a capitalistically 
appropriate observation.

 >  It's a
>  ubiquitous service that if you know the DID is a mobile number (or
>  SMS-enabled virtual phone number), you can send an SMS and you can be
>  confident that your message was likely displayed on the end-users phone
>  (or email, or something).  You don't need to have AIM installed, or know
>  their handle, or use some third party service.  You know the phone number?
>  You can send a text message.

Yes, that is an apt description of how SMS works.  :)

>  I'm surprised you see this as a bad time to put money into SMS-related
>  services.  1.9 to 2 million tweets per day [1][2] -- lots of money and
>  development going there. 4.1 billion SMS messages sent per day in the US
>  alone [4] (3.5 billion per day in 2008 [5]).  If you don't see a revenue
>  opportunity there, then Alex, we need to have a beer. :-)

I'm always up for a beer.

There are two ways to see this;  one is that use of SMS is a growth 
market opportunity, and another is that the mushrooming diversity of 
applications for SMS is rapidly straining its capabilities and 
usefulness as a medium and only accelerating its expiration.

As aspects of the mobile experience apart from straight voice calls 
stand now, there are two categories:

(1) Plain text messages of <= 160 characters, almost always metered or 
requiring a comparatively expensive unlimited plan byte-for-byte.

Strength: Ubiquitous on all types of mobile handsets.

(2) Everything else data (web, e-mail, umpteen gazillion 
iPhone/Blackberry/Pre/etc. apps, etc.).  Generally unmetered, and 
where metered inexpensively byte-for-byte compared to SMS.

Weakness: Presently confined largely to higher-end phones and service 
plans.

Strength: A thousand times more useful, extensible and adaptable than 
plain text, unleashes a completely new generational set of 
capabilities for mobile devices that makes them strikingly similar to 
little interactive computers.  Much richer user experience.

...

Now, the smartphone market has grown significantly in the last two 
years with the introduction of the iPhone and its cohorts, even among 
casual non-business consumers.

I assume it is not controversial for you that smartphones are going to 
become more common and cheaper (Google is pushing that _really_ hard, 
among other things).  I also assume it is not controversial that more 
and more features presently associated with higher-end smartphones 
will creep into the next generations of lower-end consumer-grade 
handsets and over time raise the capability floor on the bottom. 
Additionally, I assume that these structural changes are no more than 
a few years off at most, especially in the North American & W. 
European markets.

Given those premises, as it becomes more and more possible to utilise 
data/Internet/IP/3G on an ever-expanding class of devices more 
affordably, where does SMS fit into this picture?  Given its 
generational obsolescence and incompatibility with these emergent but 
soon to be more mainstream categories of user experience, I suggest 
that it's going to rapidly become irrelevant, although there is no 
doubt that the carrier and aggregator/clearinghouse racket that lines 
its pockets with it will do its best to slow the trend down.

Your mention of Twitter is interesting.  Twitter was originally 
designed around SMS because at the time of its inception that was 
still an almost exclusive means of realistically disseminating text to 
mobile devices.  With the advent of the iPhone & the App Store, and 
copycat attempts at similar ecosystems and marketplaces by competing 
vendors, it is possible to equip nearly every mainstream smartphone 
now with at least one Twitter client of some description.  Despite the 
fact that those applications must be explicitly invoked, their 
interface is certainly richer, more powerful and easier to use than 
the comparatively crude SMS gateway into Twitter.

And it's a matter of time before all that evolves in a more "push" 
direction to erase the perceptual distinction between an asynchronous 
incoming SMS vs. a Tweet produced by a client application, as many 
instant messenger clients already do on those devices.  Do you really 
see Twitter as an example of a major growth path for SMS at this 
point, rather than a vestigial aspect?  Maybe we really should have 
that beer.  :)

>  There are 6.4 billion minutes of use on the wireless side of things alone
>  made every day in the US [6], and we're all over that, even with slim
>  margins (I couldn't find a source for total number of minutes of use per
>  day in the US across landline and mobile).  4.1 billion SMS messages is
>  more that the number of phone calls.  It'd be nuts NOT to invest in that,
>  especially if you are already investing in VoIP/Telephony.  Sure, it may
>  disappear eventually, but right now it's a pretty huge deal.  Make your
>  money while it's hot.

You're leaving out one significant downside that isn't present with 
VoIP at large:  the SMS economy is very closed and cornered by a very 
limited number of suppliers, as the preceding discussion in this 
thread has borne out to some extent.

Also, there's a significant CAPEX formula to consider.  Last time I 
checked, there weren't any ILEC and major mobile operators' 
representatives with strategic decisionmaking power subscribed to the 
list.  We're all small to medium companies here, and should do the 
things that are most profitable for smaller companies.  Small 
companies gain an advantage through maneuverability, innovation and 
thinking ahead, while large companies excel at wringing every last 
ounce of value out of mature product that exists now and optimising 
already sunk investments for maximum profitability.  None of us have 
umpteen gazillion dollars to throw at ephemeral, short-term 
opportunities.

All the carriers want to stall their inexorable march toward the role 
of commoditised "dumb pipes" for third-party applications and 
services, but we know that's what's going to happen -- it's just a 
matter of when.

If I'm right and SMS is a sinking ship due to the _rapidly_ evolving 
capabilities and downward-trending cost (per unit of functionality) of 
the mass-market mobile handset, you should be thinking ahead, not 
belatedly hustling your way onto a crowded bandwagon.  The mobile 
handset today is capable of far more sophisticated two-way data 
transmission than ~160 character text messages, and that capability is 
_already_ mainstream in certain segments.  Are you really suggesting 
that in December 2009, money should aggressively be poured into an 
overpriced, borderline mafia-regulated ~10 year old method of 
delivering short, plain text messages consisting of about two lines of 
80x24 terminal text?

-- Alex

-- 
Alex Balashov - Principal
Evariste Systems
Web     : http://www.evaristesys.com/
Tel     : (+1) (678) 954-0670
Direct  : (+1) (678) 954-0671